BULLETIN: The state of Montana has issued a Cease and Desist order to TelexFree, revealing it had been unsuccessfully seeking complete information from the MLM “program” for months and alleging that TelexFree continued to do business in the state after claiming it had pulled out.

The April 23 order was issued by the office of Monica Lindeen, Montana’s Commissioner of Securities and Insurance and state auditor. The state says it suspects TelexFree “may be a pyramid scheme that has already cost Montanans $70,000” and that the firm “appears to have engaged in practices that violate the Securities Act of Montana.”

TelexFree sought to register as a multilevel distribution company in July 2013, but the form submitted to the state was “obsolete and no longer accepted by the [Office of the Commissioner of Securities and Insurance,]” the C&D alleged.

In August 2013, according to the C&D, the state sought a list of “all” TelexFree participants in Montana, specifically requesting their names, addresses, phone numbers, sums paid to TelexFree, sums received from TelexFree, participant starting dates and the names and addresses of individuals sponsoring TelexFree participants in the state.

Montana also requested “copies of all agreements, solicitation documentation, sales materials, marketing materials, brochures, any policy and procedure manual, any customer receipt, and any other information made available to prospective participants,” according to the C&D.

At the same time, the state asked TelexFree for information on start-up kits and a list that would include dates, times and locations of recruitment or demonstration sessions or TelexFree meetings in the state since Jan. 1, 2012, according to the C&D.

In October 2013, according to the C&D, an attorney for TelexFree provided the state an “incomplete spreadsheet of Montana” TelexFree participants and a “link” to the TelexFree website, which purportedly contained the marketing/sales material Montana requested two months earlier.

The attorney, who was not identified in the C&D, also advised the state that TelexFree did not use start-up kits and further advised authorities that a TelexFree participant in Billings was holding meetings twice a week, according to the order.

TelexFree ignored some spreadsheet fields and provided incomplete or inaccurate information on “all consideration paid to date by at least one participant,” according to the C&D.

The state then notified TelexFree that it needed to file the correct form to operate in Montana, according to the C&D.

In late October, TelexFree notified the state through the attorney that it was “in the process of gathering information to re-submit their application and, in the meantime, had ceased offering the TelexFREE program in Montana.”

But despite TelexFree’s claim it had stopped operating in the state, Montana “subsequently received information to the contrary,” according to the C&D.

One TelexFree participant, for example, made five purchases in the state after TelexFree claimed it no longer operated there, according to the C&D.

By February 2014, according to the C&D, the attorney informed the state TelexFree would not resubmit the application and again stated the firm was not operating in Montana.

As of April 23, 2014, according to the C&D, Montana had identified at least 34 participants in the state, saying it believed “more Montana participants may exist.”

The C&D accuses TelexFree of operating an MLM unlawfully in Montana, withholding facts and lying about ceasing its operations there. The document also cites fraud actions filed against TelexFree April 15 by the Massachusetts Securities Division and the U.S. Securities and Exchange Commission. Meanwhile, the C&D notes that TelexFree filed for bankruptcy in Nevada earlier this month.

TelexFree says it is a VOIP firm. Montana noted that the TelexFree “software could be used for unlimited calls to landlines and mobile phones to about 70 countries for a fixed monthly price of $49.90. A VOiP competitor, Vonage, sells a similar product for $12.99 a month.”